HEALTH INSURANCE: THE HAWAll EXPERIENCE

Introduction

Health care and health insurance reforms are once again high priority items on

the national public policy agenda, as they were in the early 1970’s. The national

efforts faded, but the State of Hawaii managed to implement its health insurance

agenda. Hawaii’s 1974 enactment of mandatory, employment-based health insurance

was nearly defeated because of “imminent” national health insurance legislation, and

Hawaii’s Prepaid Health Care Act (HPHCA) had to contain a clause that would

terminate the State program when federal health insurance legislation was enacted.

Nearly two decades have passed. At the national level, the debates are

reminiscent of the 1970’s, but with a cost-containment focus because of double-digit

annual cost increases and the doubling 01.

1970’s. Meanwhile, Hawaii has moved

insurance availability for its residents by

GNP dedicated to health care since the early

on to address the remaining gaps in health*

enacting a State Health Insurance Program

(SHIP) (33), directed at the “gap group” without health insurance, thereby leading to

near universal health insurance availability to Hawaii’s residents through a variety of

private and public health insurance programs.

Is there anything to be learned from the Hawaii experience that is of value to

the national health policy agenda and to other states?

It is not possible to export Hawaii’s (environment and economic) climate. Butthe techniques which have evolved in Hawaii can be deliberately preservedthere, and deliberately transferred to other environments (40).

Page 4

This conclusion was made in 1978, referring to the experience with the June

1974 HPHCA, Hawaii’s mandatory, employment-based health insurance legislation.

Adoption of that approach by other states was precluded by the 1974 federal

Employee Retirement Income Security Act (ERISA), which was enacted in September

1974, a few months after HPHCA. In 1981 the U.S. Supreme Court confirmed 1977

lower court rulings that ERISA preempted such state actions, including the HPHCA

(4), but in 1983 the U.S. Congress granted exemption from ERISA for the original

HPHCA but not for any further expansions of its benefits, nor for any other state (31).

Thus, the effect of federal policy has been to exclude the adoption of Hawaii’s

mandatory, employment-based health insurance system by other states. We will

never know what the impact on current national health care policy would be, had

other states not been constrained by the ERISA preemption. A window of opportunity

of only three

insurance..

In this

months in 1974

case study, the

provided Hawaii’s workers with mandatory health

health insurance situation in Hawaii is described,

beginning with a short history of

descriptions of how the state’s

health insurance in Hawaii, followed by summary

mandatory, employment-based health insurance

system works and the state’s Medicaid program, and ending with a special emphasis

on the admittedly short experience of SHIP, the state’s “gap group” insurance

legislation.

Health Insurance in Hawaii

Albert Yuen, retired President of the Hawaii Medical Service Association

(HMSA) (the Blue CrOSS\Blue Shield organization in Hawaii), who was also one of the

Page 5

Vice-Chairs of the Advisory Committee to SHIP, Hawaii’s “gap group” health

insurance program, recently described the history of health insurance in Hawaii (40).

His recollections are as follows:

A Brief History of Health Insurance in Hawaii l

The 1930’s:

Between 1932 - 1935, a call for “Compulsory Health Insurance” was hotlydebated in Congress and in State legislatures. This proposal acquired the label of“socialized medicine” and never passed in Congress or in any State. Concurrentdebate on Social Security, however, resulted in passage of the Social Security Act in1935.

By 1932 the sugar and pineapple industries -- Hawaii’s two major employersat the time -- already provided their employees and dependents with comprehensivemedical care through plantation dispensaries, hospitals, salaried physicians, andcontracts with specialty clinics.

At the 1935 Annual Conference of Social Workers, Miss Mary Cotton, a socialworker, introduced a Resolution to study the prospect of developing a voluntaryprepayment Hospital Plan for Hawaii, The study resulted in the founding of HawaiiMedical Service Association, or HMSA, which started operations in May 1938,2Social workers and school teachers were the initial enrollees. From its inception,HMSA benefits covered office visits, surgery, hospital services, and maternity care.Coverage for office visits was essential, as many employers and employees inbusiness had experienced Plantation Plan benefits. Competitive medical insurancecoverage came from insurance carriers offering “Indemnity Program with Deductibles. ”Active carriers were Prudential, Aetna Life, and Mutual of Omaha. These carriers usedthe offer of health insurance coverage as a “door opener” to market their group lifeprograms.

1 From a speech by Albert H, Yuen, retired President of the Hawaii Medical Services Association(HMSA) and Vice-Chair of the State Health Insurance program (SHIP) Advisory Committee, “FromPHCA to SHIP: A Personal Recollection, ” presented at the “Workshop on the Hawaii State HealthInsurance Program, ” Ilikai Hotel, Honolulu, Hawaii, March 26-27, 1992,

2 HMSA has been affiliated with the Blue Shield Association since 1946, and became a Blue CrossPlan on January 1, 1990. Blue Cross, which formed as a nationwide association in 1938, and BlueShield, which formed in 1946, merged in 1982 to become the national Blue Cross and Blue ShieldAssociation, a trade organization representing 73 independent plans throughout the United States.Source: Hawaii Medical Service Association, “ 1990 Annual Report, ” Honolulu, HI.

Page 6

The 1940’s:

The “War Years” -- 1941 - 1945 -- brought an influx of Federal employees toPearl Harbor, Hickam Air Force Base, and the army bases at Schofield Barracks andFort Shafter. Due to their experience with Blue Cross/Blue Shield on the “mainland, ”many of these employees gravitated to HMSA for health insurance coverage.

In September 1946 the pineapple industry discontinued their comprehensive“Plantation Plan, ” and contracted with HMSA in its “Free Choice of M.D. andHospital” Plan. Shortly thereafter, through labor/management negotiations, a special“Stevedore” P lan was deve loped fo r I n te rna t i ona l Longsho remen ’s andWarehousemen’s Union (ILWU) members. These special plans helped HMSA developsound cost data and utilization patterns, permitting HMSA to expand benefits andextend its group coverage to employers with 5 or more employees,

The 1950’s:

Negotiated health care plans became a vogue in contract renewals betweenlabor and management in various industries and among large employers. Many ofthese contracts called for 100 percent employer contribution to employee premiumsand 50 percent contribution for dependent coverage.

By 1957 HMSA had introduced Plan 4, offering coverage from the first officevisit to a $20,000 Major Medical Benefit Rider. Commercial carriers often matchedthese benefits in competitive bidding. 1959 was an important year, for the “FederalEmployees Health Benefit Act” was passed by Congress. This brought about a largeincrease in growth of membership enjoying very comprehensive benefits. The sameyear, the Kaiser Plan began, with its Closed Panel Practice and own hospital to serveits members.

The 1960’s:

In 1961 the State Public Health Fund Law was passed by the Hawaii StateLegislature. The Plan was patterned after the Federal Plan, and State and countyemployees were allowed a choice of HMSA, Kaiser, or Aetna Life plans. WithMedicare, Medicaid, and CHAMPUS (for military dependents) in place by the mid-1960’s, over 85 percent of Hawaii’s population had access to some type of healthinsurance coverage.

In 1967 the Hawaii State Legislature passed “Act 198, ” calling for theLegislative Reference Bureau to conduct a study on Prepaid Health Care for Hawaii,The Study was under the direction of Dr. Stefan Riesenfeld, a professor of law at theUniversity of California and an authority on social legislation. The Riesenfeld Reportrecommended a scheme with the following principles:

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1. Every regular employee in private employment should be protected by a prepaidplan providing hospital, surgery, and medical benefits.

2. The level of benefits should conform to community standards.3. The “free choice” of physician by the employee should be protected.4. Prescribed coverage could be provided by any existing Prepayment Plan such

as HMSA, Kaiser, or commercial carriers.5. The Scheme should not interfere with the bargaining process or collective

agreements such as existed in the sugar industry.

The 1970’s:

Based on the Riesenfeld Report, a Draft Bill for a Prepaid Health Care Act wasintroduced by State Senator Nadao Yoshinaga, Chairman of the Senate Ways andMeans Committee. Hearings and debates were held in the 1971, 1972, 1973, and1974 sessions of the Legislature. Support came from health-related organizations,social workers, and labor unions. Opposed were the Health Insurance Association ofAmerica, the Inter-Industry Study Committee (an employers’ group), and the HawaiiMedical Association. These latter groups questioned the necessity of the Act, as amajority of Hawaii’s residents were already covered, and passage of a National HealthInsurance Program seemed imminent. To resolve this last concern, the final Draft Billcontained a clause that would terminate the State program when the Federal lawpassed.

The Hawaii Prepaid Health Care Act (HPHCA) was passed in June 1974 andbecame effective in January 1975. Administration of the program was assigned tothe Department of Labor and Industrial Relations. Operations were handled by theDisability Compensation Division with the support of an appointed citizens’ group --TW Prepaid Health Care Advisory Council.

In 1978 under a Federal contract with the Department of Health, Education andWelfare’s Region IX office, the Martin Segal Company conducted an Evaluation ofImpact of Hawaii’s Mandatory Health Insurance Law. In its report, the followingfindings were made:

“The Hawaii Prepaid Health Care Act has been viewed as a success -- it hasresulted in the intended expansion of health insurance coverage, both in termsof numbers of people and the extent of their benefits. This has caused nomajor dislocations which can be identified. It has not resulted in any identifiablestrain on the health care delivery system. Employers have not reportedsignificant economic problems. Administration of the Act is simple.

“We are impressed that Hawaii is a microcosm. We are also impressed that itselements are accessible and understandable. Thus it seems that it is possiblenot only to learn from the Hawaii experience, it is also possible to extrapolatelessons for practical applications.

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“It is not possible to export Hawaii’s climate. But the techniques which haveevolved in Hawaii can be deliberately preserved there, and deliberatelytransferred to other environments. ”

The 1980’s and into the 1990’s:

With the success of the Hawaii Prepaid Health Care Act, there still wereconcerns over an estimated 4.5 percent of the population with no health insurance --what became known as the “Gap Group. ”

In 1986 Governor John Waihee introduced a “New Initiative for UniversalAccess to Health Care, ” targeting the “Gap Group. ” Under Director of Health JohnLewin, surveys were conducted to identify people without health insurance, andlobbying of the State Legislature began on what became known as “SHIP” (StateHealth Insurance Program).

In April 1989 the Legislature passed the SHIP Act and the Governor signed itinto law on June 26, 1989, Between April and June, the Director of Health appointeda 20-member Advisory Committee. Six subcommittees addressing different aspectsof the PIan were given 60 days to develop recommendations. The firm of Coopers& Lybrand was selected as consultant, and coordinated the work of the AdvisoryCommittee and designed the final Plan. A SHIP administrator was appointed inOctober 1989. By June 1990, contracts were signed with HMSA and (by August1990, with) Kaiser Permanence, and the program began operations within a year ofthe Act’s passage. By 1992, after 18 months of operations, nearly 16,000 peoplewere enrolled.

. Clearly, Hawaii’s economic climate vis-a-vis health insurance availability is

special. Its pre-World War II economy was dominated by two industries, pineapple

and sugar cane, which provided comprehensive medical care services to their

plantation-based employees, Labor unions have also been a powerful force in the

state, and through the collective bargaining

benefits were an integral part of the collective

companies thus were created or entered into

large groups of clients.

process, comprehensive health care

bargaining process, Private insurance

business in the state to service these

A crucial step in Hawaii’s march to universal health insurance was the national

health insurance debates of the early 1970’s, which provided the impetus for support

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from key legislators in the Hawaii state legislature to enact the HPHCA, requiring

employers to provide health insurance for any employee who worked 20 or more

hours a week. And finally, in 1989, a new governor and new director of the state

department of health, during a time of state budget surpluses,

through, in a single legislative session, the State Health Insurance

provide health insurance to the remaining “gap group. ”

were able to push

Program (SHIP), to

Thus, in Hawaii, through private health insurance, the Medicare and Medicaid

public programs (and to a limited extent for ex-military and military dependents, the

CHAMPUS and Veterans’ Administration programs), and SHIP, health insurance is

now available, at least potentially, to every resident. The current Director of Health,

John Lewin, now sees his task as developing this patchwork of health insurance

programs into a “seamless system of care, ” in which benefits and payments are

standardized:

Such a system would guarantee Medicaid, other government sponsored. insurance programs, private insurance and Medicare recipients a standard

package of benefits. Providers of care would be similarly guaranteed standardand fair reimbursement for services, regardless of insurance or financingmechanism. This type of system brings parity to the delivery of health careservices, by allowing both public and private insurance recipients to receivecomparable benefits and provider reimbursement.

To be effective, each state’s standardized benefits package should encompasspreventive and primary care, emergency care, inpatient care, tertiary andcatastrophic care, mental health and substance abuse benefits, preventivedentistry and prescription drug coverage. Long term care coverage mustinclude home and community based services for our elderly .,. (26)

Whether such a seamless, standardized system of care can be quilted out of a

patchwork of programs is a very tall order, because Director Lewin’s vision is not only

to standardize but also to expand the benefits package. Given Hawaii’s current

economic climate, which is drastically different from only three years ago when SHIP

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. —

was enacted, it seems that the vision of a seamless system of care will have to be put

on hold for a while.

However, the fact remains that some type of health insurance is now potentially

available to nearly all of Hawaii’s residents. Variability in benefits, and whether all

persons in fact have health insurance, of course remain as issues.

Health Insurance in Hawaii

The Extent of Health Insurance Coverage

The Hawaii Medical Service Association estimated that, at the beginning of

1992, approximately 80 percent of Hawaii’s residents were covered by private health

insurance (including approximately 15,000 enrollees in the first full operating year of

SHIP, see below), approximately 10 percent by Medicare, about 7-8 percent by

Medicaid, and between 2-3 percent remained uninsured (table 1 ) (20).

The private health insurance market is dominated by two carriers, HMSA and

Kaiser Permanence, with HMSA estimating that in 1991 it covered about 54 percent

of the resident population; Kaiser Permanence, about 16 percent; and 10 percent, by

other private health insurance carriers.

Not surprisingly, it is difficult to gauge how precise these estimates are of

health insurance coverage for Hawaii’s residents. HMSA estimated that its 620,000

enrollees represented 54 percent of Hawaii’s resident population (20). This estimate

that HMSA insures 54 percent of the resident population must be based on the total

resident population in Hawaii, The 1990 U.S. Census count of Hawaii’s population

was 1,108,229, of which 55,333 were armed forces personnel, and 59,935 were

military dependents. Thus, the non-military-related resident population of Hawaii in

Page 11

Source

Private

b

Table 1

Distribution of Health Insurance Coverage in Hawaii, 1992

HMSA:(l)Kaiser Permanence:Other:

Medicare

Medicaid

Uninsured

Total:

5416(2)10

Percent

80

10

7.5

-

100.00

(1) Includes approximately 15,000 enrolled in the State Health Insurance Program orSHIP, directed at the “gap group” of uninsured Hawaii residents

(2) Kaiser Permanence does not offer coverage in all geographic areas of Hawaii. Inthose areas in which coverage is offerred, the organization estimates that it covers21.5 percent of the population (see reference 25).

(3) This number is probably fairly “soft,” as the number of uninsured is a residual figure.It might easily be anywhere from 2 to 6 percent or higher.

Source: Hawaii Medical Service Association, Honolulu Advertiser, page A7,February 7, 1992.

1990 was 992,961 (8). HMSA’S 1992 enrollment of 620,000 would be 56 percent

of the total population, 55 percent of the population if the 1990 Post-Enumeration

Survey estimate of 1,136,000 (8) were used as the total population, and 62 percent

if the non-military-related population were used.

HMSA also estimated that the Medicaid enrollment of 84,000 at the beginning

of 1992 comprised 7.5 percent of Hawaii’s population. Using the total population,

84,000 would be 7.6 percent. Using the non-military-related population, 84,000

would be 8.5 percent. interestingly, the Department of Health, at a recent

conference, summarized the health insurance status of Hawaii’s residents in the

following manner, Prior to full implementation of SHIP in 1990, of 971,500 non-

military-related residents, 88,3 percent were insured (presumably including Medicare

and private health insurance), 6.7 percent were on Medicaid, and 5 Percent were

uninsured (35). However, the average 1990 Medicaid enrollment was 73,364 (1 4),

or 7.6 percent of the non-military-related population. (Note also that the non-military-.

related population of 971,500 that is used by the Department of Health differs from

the published figure of 992,961. This difference may be due to subtracting

18,360 residents temporari ly out-of-state during the Census, as well as

institutionalized population. )

The point of this brief discussion on existing analyses of Medicaid enrollees

which there is available data, is that estimating enrollment in private insurance p

the

the

for

ans

is ineluctably more difficult. To illustrate, the author attempted to survey private

insurance carriers, to estimate the number of Hawaii residents with private health

insurance, and the demographics and utilization patterns of the

Besides HMSA and Kaiser, the dominant underwriters in Hawaii,

privately insured.

the names of 17

Page 12

other insurance carriers which were reported to underwrite health insurance in Hawaii

were obtained from the State Health Insurance Program. Of these 19 carriers, one

was no longer in Hawaii, 7 did not underwrite health insurance in Hawaii, and the

remaining

clients to

11 did underwrite health insurance in the state, ranging from a few hundred

the approximately 620,000 clients reported by HMSA as enrolled in its

various plans in 1991, However, most of the companies who did underwrite

insurance in Hawaii stated that they would not be able to provide information, as their

data were aggregated at either a regional (e. g., the western U. S.) or national level.

Moreover, some insurers who did not underwrite health insurance in Hawaii (for

example, they underwrote disability and/or life insurance) stated that they knew there

were Hawaii residents covered by their companies, but through central health

insurance pol icies with the Hawaii employees’ parent companies’ “mainland”

headquarters (for example, a hotel chain), and that there was no way these policies

could be identified..

An interesting fact uncovered in this attempted survey was that, because both●

the husband and wife were employed in many families, there was a significant amount

of double coverage of the workers’ dependents.3 (One insurer estimated that as

much as 10 - 15 percent of its enrollees

coverage situation is not crucial to estimat

were double covered (25). ) This double-

ng the number of insured and uninsured in

3 In these situations, the “birthday rule” is applied, under which the health plan of the employeewith the earliest birthday in the year, regardless of their comparative age, would be billed fordependent care. For example, suppose we have a family with one child and both the husband and wifewere employed for 20 or more hours per week, but for different employers, and both employersprovided health insurance for both their employees and their dependents. Suppose further that thehusband’s birthday is in March, and the wife’s, in July. If their child becomes ill and incurs a medicalbill, the health plan of the husband would be billed. Among all such double-covered families, theimpact on their employers will be equitably distributed by the “birthday rule. ”

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-. —

Hawaii, except to the extent that estimates of the insured are inflated by these

double-coverage situations.

If various sources cannot agree on the number of people in the denominator,

nor identify all potential sources of insurance, estimates of the number of uninsured

will necessarily be “soft, ” because the number of uninsured is the residual number

after estimates of the insured have been attempted,

Mandatory, Employment-Based Health Insurance

We turn next to HPHCA, the mandatory, employment-based health insurance

legislation enacted by the Hawaii state legislature

foundation of Hawaii’s health insurance system.

HPHCA, under which employees are provided

in 1974, and which is the

health insurance through the

private firms identified above, has been succinctly described by Trauner and Crichlow

of Coopers & Lybrand, the firm hired by the Department of Health to design the.

benefit package for SHIP, the “gap group” legislation enacted in 1989:

The Prepaid Health Care Act, enacted in 1974, set specific benefit, eligibility,and contribution requirements for Hawaii’s employer-sponsored health benefitplans. Health plans must include at least 120 days of inpatient hospitalcoverage per year, outpatient hospital, and emergency room care; surgical,medical, and diagnostic services; and maternity benefits for individuals coveredfor at least nine months prior to delivery (citation omitted) . . .

The only permissible exemptions to the Prepaid Act are for “new hires”(employed less than four consecutive weeks), part-time employees (employedless than 20 hours per week), low-pay employees (those with monthly earningsof less than 86.67 times the minimum wage), and certain categories of workers(i. e., governmental, seasonal, commission-only, and self-employed) (citationomitted). All health plans offered in the state are subject to regulatory approvaland, depending upon their benefi t structure, are classif ied as Type A(comprehensive) and Type B (less comprehensive) plans.

Page 14

When the Prepaid Act was enacted, the requirements for Type A plans weremodeled on the prevailing benefit packages offered by Hawaii Medical ServicesAssociation (HMSA) and Kaiser Foundation Health Plan (KFHP). “HMSA Plan4“ and “Kaiser Plan B“ were viewed as “prevailing” plans because they had thelargest number of subscribers of any programs in the state. These two planscontinue to be the dominant plans in Hawaii, covering a majority of the state’sresidents under age 65. The general benefit structures of these plans haveessentially been maintained since 1974. Carriers have taken the initiative toincorporate cost containment measures into their state-approved plans,including preferred provider arrangements and utilization review. For example,HMSA’S most prevalent Type A plan (HMSA Plan 4) requires preauthorizationfor certain surgical procedures and substance abuse treatments.

HMSA’S basic plus major medical pIan offers 100% coverage for eligiblecharges related to the first 150 days of inpatient hospitalization; 100°/0coverage for eligible surgical services; and 8070 coverage for certain otherphysician, medical, and diagnostic services. The major medical portion has a$250 calendar year deductible and a $2,500 annual out-of-pocket maximum(including the deductible). KFHP’s plan offers prepaid health maintenanceorganization (HMO) benefits for covered inpatient and outpatient services, withmembers having a $4 copayment for each medical office or emergency roomvisit.

Under the Prepaid Act, Type B plans offer reduced coverage, such ascomprehensive plans with up-front deductibles and pre-existing conditionclauses. However, few employers have e l ec ted t o o f f e r Type Bindemnity/service plans because of the contribution formula built into thePrepaid Act.

Whether an employer offers a Type A or Type B plan, the Prepaid Act requiresthat the employer pay at least one half of the premium for employee-onlycoverage. Moreover, the Act limits each employee’s out-of-pocket premiumcost for employee-only coverage to 1.5% of wages. There is no requiredemployer contribution for dependent coverage for Type A plans, whereas forType B plans, the employer must pay 50% of the cost, Today, the 1.5?% capon employee-only costs means that the employer usually pays most of the costof employee-only coverage, particularly for low-income employees. Becausethere is a relatively narrow spread in premium costs between Type A and Bplans, most employers offer Type A plans. Accordingly, those employers withType A plans who do not choose to pay for dependent coverage are not subjectto the 50% contribution rule.

For example, small group rates under HMSA’S Plan 4, effective in April 1991,are $107.76 for a single, $215.52 for two-party coverage, and $323.28 forfamily coverage. Under HMSA’S Plan 9, an 80/20 Type B plan, small grouprates are $94.52 for a single, $189.04 for two-party coverage, and $283.56for family coverage. Under Plan 4 and Plan 9, the maximum contribution that

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a clerical employee, earning $1,500 monthly, would pay for a single coverageis $22.50 per month. Therefore, the minimum employer contribution for singlecoverage under Plan 4 would be $85.26 and $72.02 under Plan 9. However,the added $13.24 that an employer pays for single-only coverage under Plan4 is significantly less than the incremental cost for family coverage underplan 9 (i.e., 50$% of the family premium less the cost for single coverage) (36).

A voluntary community rating system is also applied, under which small

businesses (under 100 employees) are consolidated into a larger risk pool, at premium

rates the state director of health estimates average 50 percent less than rates of other

states (26).

Finally, HPHCA has two penalties for noncompliance: 1 ) the employer is liable

for the health care costs incurred by an eligible employee during the period which the

employer fails to provide coverage; and 2) a noncomplying employer can be fined and

enjoined from conducting business. A 1991 review of Hawaii Department of Labor

and Industrial Relations reports by the contractor evaluating SHIP for the Department

of Health could find no significant violations nor use of the subsidy provision (4).

Hawaii’s Medicaid Program

Hawaii’s Medicaid program is available to residents with incomes equal to or

less than 62.5% of the federal poverty level (FPL), and with assets of less than

$2,000 for one person, $3,000 for a family of two, and $250 for each additional

family member. In addition, recent expansions have included children age 6 and older

but under age nineteen (but only children born after September 30, 1983, are eligible),

the aged and the disabled, who are eligible if their (or their parent or guardian)

incomes are equal to or less than 100 percent of the FPL; children age 1 through 5

(expanded to age 8), if income is equal to or less than 133 percent of the FPL; and

Page 16

pregnant women and children under age 1, if income is equal to or less than 185

percent of the FPL (table 2) (1 5).

The Hawaii Medicaid benefits package is summarized in table 3.

In January 1992 there were 84,744 enrollees in the Medicaid program, while

there were 178,417 persons enrolled during the course of calendar year 1991. Based

on claims paid during the period April 1, 1991 through March 31, 1992, the

unduplicated recipient counts total led 67,868 (16). Thus, about twice the number of

enrollees on a given day were enrolled at one time or another during the course of the

year, and about 2 of every 5 enrollees who were enrolled at any time in 1991 utilized

medical services in 1991. In table 4 are identified: 1 ) the average 1990 enrollment;

2) the enrollment on January 1992, the total number of enrollees in calendar year

1991, and the number of enrollees who utilized services (based on claims paid during

the period April 1, 1991 through March 31, 1992);’ and 3) the estimated average

enrollment for 1992.

The distribution of Medicaid enrollees by island is summarized in table 5. The

percent of total Medicaid recipients for the islands of Hawaii (12.1 percent) and

Moiokai (1 9.1 percent) markedly exceeded the statewide average (6.5 percent).

Because of expanded OBRA options affecting pregnant women with children,

children, the elderly, and the disabled (see above), 22,000 enrollees have been added

to the Hawaii Medicaid program between 1988 and 1992. (Some of this added

enrollment is also due to the implementation of SHIP, in which applicants who may

be eligible for Medicaid are referred there (see discussion below). )

The added enrollments (increasing from more than 73,000 in 1990 to near

85,000 in January 1992, and to an estimated 89,000 at the end of 1992 -- see tab

Page 17

Y

e

Table2

Category

General

Children age 6but under age 19,the aged, andthe disabled

Eligibility for Hawaii’s Medicaid Program

Income LimitPercent of Federal Poverty Level (FPL) Asset Limit

< o r = 62.5% of FPL $2,000 for oneperson$3,000for family oftwo; $250 foreach additionalfamily member

< or = 100% of FPL

Children age 1 < or = 133% of FPLthrough age 5

Pregnant women < or = 165% of FPLand childrenunder age 1

Source: Family & Adult Services Division, Hawaii Department of Human Services.

Table 3

Hawaii Medicaid Benefits Package

Pays for the following services:Inpatient hospital servicesOutpatient hospital and clinic servicesPhysicians’ (including osteopathic) servicesSkilled nursing facility servicesIntermediate care facility servicesX-ray and laboratory examinationsDrugs, biological and medical suppliesPodiatry (foot care)Whole bloodHome health servicesMedical equipment and appliancesEye examinations, refractions and eye glassesDental servicesFamily planning servicesDiagnostic, screening, preventive and rehabilitative servicesProsthetic devices, including hearing aidsTransportation to, from, and between medical facilities. This includes interisland or out

of state air transportation, food, and lodging as necessaryHospice carePsychological servicesEarly and Periodic Screening, Diagnosis, and Treatment (EPSDT) services

As an alternative to institutional care, the chronically ill and disabled may receive:Adult day healthCase managementEmergency alarm response systemEnvironmental modificationHabilitationHome-delivered mealsHome maintenanceHomemakerMoving assistanceNutritional counselingPersonal careRespiteSkilled nursing (emergency/24 hour)Transportation

Hawaii Medical Benefits Package, Table 3 (continued)

Does not pay for the followig services:Naturopathic, chiropractic and Christian-Science servicesPriviate duty nursingCosmetic surgeryUnapproved drugs and medical procedures of an experimental naturePersonal comfort items such as radio, television or telephoneOrthodontic services and fixed bridgeworkCertain vitamins and vitamin mixturesAcupuncture

Source: Family & Adult Services Division, Hawaii Department of Human Services

1990:

1991 :

1992:

Table 4

Hawii Medicaid Enrollees, 1990-1992

Average enrollment: 73,364

Number of enrollees in January 1992: 84,744

Number of enrollees in Calendar Year 1991: 178,417Number of enrollees who utilized services,based on claims paid during the period4/1/91-3/31/92: 67,868

Average enrollment (estimated): 89,000

Note: Since 1988, the Deparment of Health states that 22,000 persons have beenadded to the Medicaid roles because of OBRA options affecting pregnant women withinfants, children, the elderly, and the disabled.

Source: Hawaii Department of Human Services, Health Care Administration Division

.

#

Table 5

Hawaii Medicaid ProgramEligible Medicaid Recipients and State Population

by Island, Fiscal Year 1990 Averages

State Population % Population% TotaI Estimated % State that are

Island Recipients Recipients Population Population Recipients

Hawaii 14,527 19.8 120,169 10.6 12.1

Kauai 3,097 4.2 50,003 4.4 6.2

Lanai 5 2 0.1 2,311 0.2 2.3

Maui 3,399 4.6 85,190 7.5 4.0

Molokai 1,343 1.8 7,038 0.6 19.1

Oahu 50,946 6 9 . 5 872,489 7 6 . 7 5 . 8

Total 73,364 100.0 1,137,200 100.0 6.5,

— —

Source: Hawaii State Department of Human Services, Health Care Administration. Division.

4) led to a large shortfall in Medicaid’s 1991-1992 budget. During the 1992 state

legislative session, it was estimated that there would be a $142 million two-year

deficit, and that funds would be depleted by February 1992 unless $64 million was

provided to cover the period between February and July 1, 1992 (the state’s fiscal

year is July 1 through June 30). The $64 million was appropriated by the state

legislature, and discussions on the deficit led the legislature to consider -- but not

implement -- freezing eligibility at the 1991 federal poverty level (instead of increasing

it to the 1992 level). One mitigating factor in not freezing the federal poverty level

cutoff for Medicaid eligibility, was that the Medicaid ineligibles would then be eligible

for SHIP (2). This switch from Medicaid to SHIP would have cost the state more,

because the Medicaid cutoff is at 62.5 percent of the federal poverty level, and SHIP

enrollees with incomes equal to or below 100 percent of the federal poverty level

have no premium payments, with the state picking up all costs. Benefits to enrollees

would also have been reduced, because SHIP benefits are more limited than Medicaid.

benefits (see below).&

The 1992 Medicaid budget is estimated at $360 million; up from $214 million

in 1990.

Table 6 summarizes claims paid by type of service for the period July 1, 1989

to June 30, 1990. Hospital inpatient care accounted for 24.6 percent of total

payments; nursing home and intermediate care facilities, for 37.0 percent; and

physician services for 14.2 percent.

Table 7 compares average benefits paid per recipient by type of service for the

years 1988, 1989, and 1990. The costs of average benefits increased 7.7 percent

between 1988 and 1989, and 8.8 percent between 1989 and 1990. Notable

Page 18

. — —

July 1,

Service

Hospital Inpatient

Nursing Home Care

Intermediate Care Facility

Physician Services

Other Practitioners(2,3)

Dental Services

Hospital Outpatient(4)

Lab & X-ray

Home Health

Drugs(3)

Other Care(3,5)

Family Planning

S c r e e n i n g S e r v i c e s –

tI

Table 6

Hawaii Medicaid ProgramClaims Paid by Type of Service1989 to June 30, 1990, Cash Payment

Claims(1) % of Total Benefits

19,483

9,815

32,920

613,796

32,029

86,637

92,701

125,974

1,661

613,876

45,409

15,480

11,998

Total Net 1,701,779

Patient’s share of medical billExpenses covered by Patient’sMedical Insurance &-Other Third Parties

TOTAL GROSS BENEFITS

1.1

0.6

1.9

36.1

1.9

5.1

5.4

7.4

0.1

36.1

2.7

0.9

0 . 7

100.0

$52,667,437

16,683,972

62,504,135

30,369,969

2,518,709

6,417,098

11,352,098

4,893,720

753,174

16,739,836

7,042,125

899,922

1,064,106

213,906,301

12,481,416

5,456,131

$231,843,848

% of Total

24.6

7.8

29.2

14.2

1.2

3.0

5.3

2.3

0.4

7.8

3.3

0.4

0 . 5

100.0

(1) A claim refers to a document submitted for payment and may consist of multipleservice lines

(2) Includes services by optometrists, podiatrists, & psychologists(3) Includes nursing home and intermediate care ancillary services(4) Includes hospital clinic services(5) Includes vision care, medical supplies, transportation, etc.

Source: Hawaii State Depatiment of Human Services, Health Care AdministrationDivision

Table 7

Hawaii Medicaid ProgramComparison of Average Benefits Paid Per User(1)Fiscal Years 1988 Through 1990, Cash Payments

Service

Hospital Inpatient

Nursing Home

Intermediate Cafe

Physician Services

OtherPractitioners(2,3)

Dental Services

HospitalOutpatient(4)

Lab & X-ray

Home Health

Drugs(3)

Other Care(3,5)

Family Planning

Screening Services

IV 1988

$3 ,245

12,357

16,652

301

199

176

288

81

1,030

165

467

146

5 6

Total $1,607

W 1989

$3,462

11,684

17,041

323

203

177

319

85

819

180

529

152

64

$1,730

% Increase(Decrease)

6.7

( 5.4)

2.3

7.3

2.0

0.6

10.8

4.9

( 20.5)

9.1

13.3

4.1

14.3

7.7

FY 1990

$3,654

12,313

17,935

299

206

170

323

85

1,016

201

479

163

132

$1,863

(1) Eligible recipients utilizing services in specific category of service(2) Includes services by optometrists, podiatrists, & psychologists(3) Includes nursing home and intermediate care ancillary services(4) Includes hospital clinic services(5) Includes vision care, medical supplies, transportation, etc.

% Increase(Decrease)

5.5

5.4

5.2

( 7.4)

1.5

( 4.0)

1.3

0.0

24.1

11.7

( 9.5)

7.2

106.3

8.8

Source: Hawaii State Department of Human services, Health Care AdministrationDivision.

increases occurred in screening services, with an increase between 1988 and 1989

of 14.3 percent, increasing sharply by 106.3 percent between 1989 and 1990.

Table 8 compares benefits paid by type of service for the years 1988, 1989,

and 1990. An increase of 4.2 percent occurred between 1988 and 1989; rising to

16.6 percent between 1989 and 1990. Again, there were sharp increases in

screening services: 6.1 percent between 1988 and 1989, increasing to 218.7 percent

between 1989 and 1990.

State Health Insurance Program (SHIP): Hawaii’s “Gap Group" Insurance Program

In 1988 - 1989 the stage was set for enactment of SHIP with the election of

a new governor, the appointment of a new state director of health, a large state

budget surplus, increasing national attention to the large number of people without

health insurance (the “gap group”), and the successful precedent of HPHCA.

The Department of Health considered six options:.

1. Include the uninsured in HPHCA. However, this course was not available

without express exemption from ERISA by the U.S. Congress.

2. Establish a state-subsidized uncompensated care fund to reimburse hospitals

for services to the uninsured. However, such a fund would not ensure access to

services nor provide preventive and/or ambulatory care services.

3. Expand the Medicaid program to cover the uninsured. However, the Hawaii

Medicaid benefits package was comprehensive, and costs would be high.

4. Establish a subsidized insurance program for unemployed workers, under the

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (P. L. 99-272).

However, only a small portion of the uninsured would be covered.

Page 19

Service

Hospital Inpatient

Nursing Home

Intermediate Care

Physician Services

OtherPractitioners(l ,2)

Dental Services

HospitalOutpatient(3)

Lab & X-ray

Home Health

Drugs#

Other Care(2,4)

Family Planning

Screening Services -

4

Table 8

Hawaii Medicaid ProgramComparison of Benefits Paid by Type of Service

Fiscal Years 1988 Through 1990, Cash Payments

% Increase YO IncreaseFY 1988 FY 1989 Decrease) FY 1990 (Decrease)

$43 ,794 ,555$44 ,821 ,076 2 .3

15,569,413 15,223,729 ( 2.2 )

48 ,189 ,511 52 ,009 ,240 7 .9

2 6 , 1 3 8 , 6 1 7 2 6 , 7 3 3 , 6 = 2 . 3

1,794,987 2 , 1 5 4 , 7 5 2 2 0 . 0

6,806,050 6,374,597 ( 6.3 )

9,050,453 9,985,753 10.3

4,383,543 4 , 4 0 0 , 0 7 3 0 . 4

554,222 503,129 ( 9.2 )

12 ,990 ,031 13 ,967 ,765 7 .5

5,681,559 6,264,412 10.3

801,341 738,401 ( 7.9 )

314,81O 3 3 3 , 9 1 1 6 . 1

Total $176,069,092 $183,510,521 4.2

$52 ,667 ,~7 17 .5

16 ,683 ,972 9 .6

62,504,135 20.2

30,369,969 13.6

2 ,518 ,709 16 .9

6 , 4 1 7 , 0 9 8 0 . 7

11,352,098 13.7

4 ,893 ,720 11 .2

7 5 3 , 1 7 4 4 9 . 7

16,739,836 19.8

7 ,042 ,125 12 .4

8 9 9 , 9 2 2 2 1 . 9

1.064,106 218.7

$213,906,301 16.6

I1) Includes services by optometrists, podiatrists, & psychologists2) Includes nursing home and intermediate care ancillary services(3) Includes hospital clinic services(4) Includes vision care, medical supplies, transportation, etc.

Source: Hawaii State Department of Human Services, Health Care AdministrationDivision.

5. Provide direct services through the Department of Health. However, this would

mean establishing a new health care system for the uninsured.

6. Develop a subsidized health insurance program for the uninsured, based on

income and family size and a special benefit package, This was the option pursued

(4),

The strategy for the new gap group insurance program was as follows:

The Department of Health recommended a combination of approaches. First,a subsidized insurance program emphasizing access to preventive and primarycare should be offered to Hawaii’s gap group. Second, Medicaid should beexpanded to include pregnant women and children from zero to six years of agein accordance with federal OBRA provisions.4 This latter step would providecoverage for children and pregnant women in families with incomes as great as100 percent of the Federal Poverty Level and, in addition, would providepresumptive eligibility to allow care prior to actual certification of eligibility.Third, any approach should have the flexibility to adopt other Medicaid optionsthat might, in the future, become available and be more cost-effective than theState Health Insurance Program. Finally, the new approach should be linkedwith prepaid health care, Medicaid, and hospitals to provide an integratedprogram to ensure that care needs are met and that beneficiaries do not fall intoany remaining gaps (4).

In the 1989 legislative session, SHIP was passed and signed into law by the

Governor on June 26, 1989 (see attachment A for the full text of the Act) (19)

One of the premises of the SHIP legislation was that the uninsured population

in Hawaii was approximately 5 percent of the civilian population, or approximately

50,000 individuals. SHIP, which was to be administered by the Department of Health

(HPHCA is administered by the Department of Labor and Industrial Relations, and the

Medicaid program, by the Department of Human Services), had the fol lowing

expressed goals:

4 As described above in the section on Hawaii’s Medicaid program, this provision wasimplemented.

Page 20

1) subsidized health care coverage for gap group individuals, including but not

necessarily limited to outpatient primary and preventive care;

2) encouraging the uninsured who can afford to participate in existing health plans

to seek that coverage;

3) discouraging individuals who are already adequately insured from seeking

benefits under the state health insurance program;

4) assuring that those persons who have the ability to pay for all or part of their

coverage be appropriately assessed by the contractors on a sliding fee scale basis; and

5) ensuring that the state health insurance program is affordable to gap group

individuals.

SHIP was signed into law on June 26, 1989. The advisory committee called

for by the Act first met on June 28, 1989, and Coopers & Lybrand was hired as the

consultant to turn the Act into an operating program (10). Six subcommittees were

established within the Advisory Committee, with the following deadlines: 1 ) Rates and

Benefits Committee, deadline of August 14, 1989; 2) Eligibility Committee, deadline*

of August 14, 1989; 3) Delivery System and Payment Committee, deadline of

September 15, 1989; 4) Administration/Data/Interrelationship Committee, deadline of

September 15, 1989; 5) Evaluation Committee, deadline of January/March 1990; and

6) Marketing Committee, deadline of January/March 1990 (9).

Three issues dominated the deliberations among the Advisory Committee,

Coopers & Lybrand, and the Department of Health: 1 ) the size of the gap group and

the information available to determine its size, its demographics, and its utilization of

hea th services; 2) which providers currently served the gap group and under what

Page 21

terms they would be willing to participate; and 3) under what terms would health care

payers consider negotiating with the state to participate (10).

To estimate the size of the gap group, case load information from health care

providers, surveys conducted in Hawaii, and nationally based estimates that included

state-by-state estimates were reviewed. Methodological problems were encountered

in all sources, and the Department of Health ended up using its original estimate of

5 percent as its starting point (1O).

Information was sought from the largest hospitals in Hawaii on the amount of

uncompensated care they provided, but most hospitals could only provide information

on “self pay” patients, without separating out the uninsured or with detai led

diagnostic information on the uninsured. Thus, the hospital information could not be

used to determine how to structure and price SHIP’S inpatient benefits (10).

Primary care centers were

patients, including estimates of the

Of utilization for the uninsured nor

(1 o).

also requested to provide information on their

uninsured. This data did not allow for prediction

for pricing of services on an age-adjusted basis

Finally, it was not possible to determine the cost of providing specific services

from HMSA and Kaiser Permanence data because of technical and processing expense

limitations; and for time and expense reasons, it was decided not to use detailed

claims and eligibility data for the Medicaid population to project utilization and costs

for SHIP (10).

Thus, it was determined that the carriers/health maintenance organizations

would price their own services, using the proposed state contribution per SHIP eligible

Page 22

and a minimum set of benefits, and providing supporting information on their actuarial

assumptions ( 1 O).

The state legislature provided $14 million for the first two years of SHIP

operations ($4 million in the first year and $10 million in the second year). The

Department of Health decided on an average state subsidy of $500/person/year, with

a maximum expected enrollment of approximately 20,000 in the 1990-1991 fiscal

year (July 1990- June 1991 ). Additional program income from premium copayments

was estimated at approximately 15 percent of total premiums, which was expected

to be more than offset by administrative and overhead costs (10).

A sliding premium scale was adopted, with premium contributions required of

families with incomes more than 100 percent of the federal poverty level, and with

eligibility up to 300 percent of the federal poverty level.

The eligibility requirements and monthly member contributions for fiscal years

1990 and 1991 are contained in tables 9 and 10. The members’ contributions are the

same regardless of sex. In 1992, the highest annual income level for S H I P

participation (at 300 percent of the federal poverty level for Hawaii) was $20,592 for

one person, and $41,760 for a family of four (35).

A particularly problematic issue in designing SHIP’S benefits package was the

scope of inpatient

reimbursement to

services to be covered. The final decision was to limit hospital

no more than 20 percent of SHIP’S medical expense budget,

excluding direct provider grants, Department of Health funded services, and any

transfer of funds to other state agencies. Per enrollee, the hospital benefit was limited

to no more than five days, predicated on a maximum inpatient benefit for fiscal years

Page 23

—

I

Table 9

State Health Insurance Program:Eligibility Requirements

In order to be eligible or to maintain enrollment in SHIP, an individual shall:

(1) Be a resident of Hawaii;

(2) Have a gross family income at the time of application that does not exceed300% of the Federal poverty for Hawaii, as adjusted for family sizeand as annualy determined by the U.S. Deparment of Health and HumanServices;

(3) Not be eligible for any United States government sponsored program whichprovides for health care benefits including but not limited to Medicaid,Medicare, or CHAMPUS whether or not application for such programhas been made (an exception shall be made for persons eligible forbenefits under the Native Hawaiian Health Care Act);

(4) Be unemployed or not have been eligible for benefits under the HawaiiPrepaid Health care Act as a regular employee or enrolled as a legalspouse of a regular employee during the three months prior to the date ofenrollment application. Children under age 19 of regular employees maybe eligible for SHIP at the Director’s discretion if the additional enrollmentof such children would not jeopardize the orderly development of SHIP orwould not result in an over-appropriation of SHIP funds; or

. (5) Not have been covered by a private health insurance policy (excludingdisease-specific and accident-only policies) for three months prior toapplication for enrollment in SHIP. An exception shall be made forindividuals who become unemployed during the three month periodoccurring prior to the date on the enrollment application.

— — - —

Source: Hawaii Department of Health, State Health Insurance Program (SHIP),“Request for Proposal,n February 5, 1990.

Table 10

State Health Insurance Program,Monthly Member Contributions

Fiscal Years 1990 and 1991

Federal Poverty Level Adult Child

100% or less $0 $0

101% - 125% $10 $5

126% - 150% $15 $7.50

151% - 200% $20 $10

201% - 250% $40 $15

251 % - 300% $60 $20

There may be a cap on the number of children per family for whom membercontributions shall be made; in no event shall the monthly family contribution exceed:1) two times an adult subscriber’s monthly member contribution, plus two times adependent child’s member contribution, or 2) three times a dependent child’s membercontribution for families in which only the dependent children are enrolled. In cases ofeconomic hardship, the Director reserves the right to limit the initial member contributionto one times the monthly member contribution. SHIP will assume financial responsibilityfor payments in excess of the member cap set by family size.

SHIP shall annually establish a maximum service copayment rate for office visits,emergency room visits, and in the future, possibly for hospitalizations. For fiscal years1990 and 1991, the copayment per office visit shall not exceed $5 and for an emergencyroom visit, for other than trauma or conditions requiring hospital admissions, a chargeof $25.

Source: Hawaii Department of Health, State Health Insurance Program (SHIP),“Request for Proposal,” February 5, 1989.

1990 and 1991 of $2,500/enrollee/calendar year ($50() for each inpatient day), plus

an additional two days of inpatient maternity care per normal delivery ( 11 ).

The Request for Proposal was issued by the Department of Health on February

5, 1990, with a proposal deadline of March 5, 1990, Only HMSA and Kaiser

Permanence responded. HMSA designed its benefits package: 1 ) by starting with a

package commensurate with $200/month per enrollee, then designing it down to

benef i ts commensurate wi th $60/month per enro l lee; and 2) des ign ing a

hospitalization benefit consistent with the limit of $500/day for five days (26), Kaiser

Permanence decided to offer a benefits package similar to its regular enrollees, but to

limit enrollment to the amount that could be subsidized by its dues subsidies program

(a portion of members’ dues revenues is allocated by each region to support the

medically uninsured and underinsured) (6). (The HMSA and Kaiser Permanence 1991

benefits package are summarized in Attachments B and C.)

HMSA initiated enrollment in June 1990, and Kaiser Permanence, in August

1990. The initial HMSA provider reimbursement rates were lower than for providers

participating in their standard plans. In 1991 HMSA increased payment levels to that

of their other plans to increase provider participation, and in part because of low 1990

utilization rates, which also led HMSA to reduce premium rates by 14 percent, and

to increase benefits to include some mental health outpatient care, antibiotics for

children, and annual pap smears for all women of child-bearing age (13).

As mentioned above, Kaiser Permanence chose to participate by offering the

same benefits package to SHIP enrollees as for their regular enrollees,5 but to limit

5 Because of the SHIP requirement of a copayment of $5 per outpatient visit, SHIP enrollees pay$1 more for an outpatient visit than most regular Kaiser Permanence enrollees.

Page 24

SHIP enrollment to its members on Oahu (Kaiser Permanence has outpatient but not

inpatient facilities on the islands of Maui and Hawaii) who either lose eligibility for

Medicaid or become unemployed and are canceled by their employer group (12), and

to limit enrollment to 1,000.

the Kaiser Foundation Health

The costs of its SHIP clients would be offset in part by

Plan’s dues subsidies program.

In November 1990, the original eligibility criteria established in August 1990

was expanded to include members in the Kaiser Permanence Service Area of the

Hawaii Region who lost Medicaid or employment-based coverage, and in addition,

dependents of Kaiser Permanence subscribers who have not been covered by medical

insurance for at least three months prior to application to SHIP and the subscriber’s

employer

addition,

coverage

does not contribute to the cost of the dependent’s medical coverage. In

during open enrollment periods, applicants had the opportunity to elect

by Kaiser Permanence (23). However , w i th in two months, Kaiser

Permanence had to restrict its SHIP enrollees to Oahu, because of insufficient provider

capacity on Maui and Hawaii (25).

In 1991 Kaiser Permanence increased its SHIP premiums by 14.45 percent, and

increased the maximum number of SHIP members for 1992 to 3,500 (13), which it

attained in April 1992 (25).

Finally, at the beginning of 1992, in addition to HMSA and Kaiser Permanence,

another provider, Island Care, in response to another Request for Proposal, submitted

a proposa

Oahu and

to provide managed care benefits to a limited number of SHIP members on

Kauai through its participating facilities (1 3).

During 1990 and 1991, SHIP also contracted with five primary care clinics on

Oahu to provide health assessments (at a rate of $75 per assessment) for any

Page 25

potential SHIP enrollee who submits an application to SHIP. This agreement was

expanded in October 1990 to also include a $50 capitated fee to provide health

services at the clinic for each individual for up to 60 days while their application was

being processed (1 3). In 1992 a new contract was signed to reimburse the clinics for

episodic care of uninsured clients (those for whom insurance doesn’t work, such as

the migrant, homeless, etc. ) and the administration of an uninsured client survey from

which SHIP will then analyze demographic and utilization data. This latter survey is

one of several studies designed to examine “the impacts of uncompensated care at

the primary care level and the ‘hard to reach uninsured, ’ the gap within the gap” (13).

For the per iod January 1992 through June 1993, $1 mi l l ion o f the s ta te

appropriations for SHIP is to be provided to the six primary care clinics for direct

services, using cost-based reimbursement similar to the provisions for Medicaid

reimbursement for Federally Qualified Health Centers (3).

At the end of 1991, there were nearly 15,000 SHIP members, with about four

of five enrolled with HMSA, and one-fifth with Kaiser Permanence. Monthly

membership for calendar year 1991 is presented in table 11, and the number of SHIP

members serviced from the onset of operations in June 1990 through December 1991

is presented in table 12.

Enrol lment continued to increase over the intervening months. Kaiser

Permanence, which had 2,739 SHIP members at the end of 1991, reported that it had

reached its maximum enrollment of 3,500 in April 1992 (25), and the total SHIP

enrollment had exceeded 15,000 by March 1992 (35).

For policy and budget reasons, SHIP has also transferred some of its funds to

other programs. In the first year of operations, SHIP funds were transferred to the

Page 26

Period

Jan. ’91

Feb. ’91

Mar. ’91

Apr. ’91

May ’91

Jun. ’91

Jul. ’91

Aug. ’91

Sep. ’91

Oct. ’91

Nov. “91

Dec. ’91

— — —

HMSA

7,703

8,270

8,661

9,060

9,363

9,917

10,333

10,745

11,135

11,277

11,519

11,828

Table 11

SHIP Membership by MonthCalendar Year 1991

KaiserPermanence Total

711 8,414

933 9,203

1,078 9,739

1,176 10,236

1,268 10,631

1,531 11,448

1,828 12,161

2,025 12,770

2,186 13,321

2,298 13,575

2,529 14,048

2,739 14,567

Change

793

789

536

497

395

817

713

609

551

254

473

519

PercentChange

10.56

9.38

5.82

5.10

3.86

7.69

6.23

5.01

4.31

1.91

3.48

3.69

— - — — — - —

Source: Hawaii Department of Health, ‘State Health Insurance Program, Report tothe Legislature,” January 1992.

— ,

HMSA Active Members

Kaiser Permanence Active

SHIP/Medicaid Expansion

Disenrollments(2)

Table 12

SHIP Members ServicedTotal, as of December 31, 1991

11,828

Members 2,739

Program(l) 722

3,048

Capitated Seevices & Assessments(3) 4,653

Total: 22,990

— — - — - — — .

(1) Children under age 8 who were enrolled in Medicaid under expansion options,through the use of funds which were transferred by SHIP to Medicaid. - “

(2) Includes members who were disenrolled dueto employment, non-payment of dues,etc.

(3) Through contracts with primary care clinics. 1,166 were health appraisals, at $75each, and 2,492 were for services for upp to 60 days while applications werebeing processed, at $50 each.

Source: Hawaii department of Health, ‘State Health Insurance Program, Report tothe Legislature,” January 1992.

Medicaid program to finance the addition of 722 children under age 8 in the Medicaid

expansion program (see table 12), with Medicaid picking up the costs in subsequent

years. And as described above, contracts have been signed with the state’s six

primary care clinics for capitated services and assessments (see table 12), and $1

million is being provided to the six primary care clinics for direct service subsidies in

the period January 1992 through June 1993.

Various characteristics of the SHIP enrollee population are summarized in tables

13- 17.

Excluding the “other” category, of the state’s ethnic populations, the largest

enrollee groups are, in descending order, Whites, Hawaiians, and Filipinos. Compared

to the state’s ethnic distribution in the 1990 U.S. Census, Koreans are the most

overrepresented among SHIP enrollees (except for “other”), followed by Hawaiians

and Samoans. Japanese are the most underrepresented, followed by Blacks and

Filipinos (table 13). SHIP reports that there were no significant differences in ethnic

distribution by carrier ( 13).

The distribution by island is summarized in table 14. The order of enrollees in

absolute numbers reflects the proportion of residents on the various islands, but

Hawaii and Molokai -- and Kauai to a more modest extent -- are overrepresented in

SHIP.

SHIP enrollment by age is summarized in table 15. Enrollment in the age

categories O - 4 and 5 - 17 were much higher than the proportion of the state

population in these age categories, and enrollees under age 18 represented 42 percent

of the total. All of the other age groups were underrepresented, with enrollees age

65 and older particularly underrepresented. In absolute numbers, the largest

Page 27

EthnicDistribution

Total

White

Black

Chinese

Filipino

Japanese

Korean

Hawaiian

Samoan.

Other

Table 13

Comparison of Ethic Distribution Between 1990 Census andState Health Insurance Program’s Population

1990 CensusPerCentagePopulation

1,108,229

369,616

27,195

68,804

168,682

247,486

24,454

138,742

15,034

48,216

Distribution

100.00

33.35

2.45

6.21

15.22

22.33

2.21

12.52

1.36

4.35

SHIP ActiveMembers for PercentageDec. 1991 Distribution

14,567 100.00

3,959

99

938

1,583

515

1,066

3,296

282

2,829

27.18

0.68

6.44

10.87

3.54

7.32

22.63

1.94

19.42

Difference inDistribution \

1.000

.815

.278

1.037

.714

*159

3.312

1.808

1.426

4.464

— -

(1) Percentage distribution of SHIP members divided by percentage distribution of 1990Census population. A ratio of less than one denotes that the ethnic group is lessrepresented among SHIP enrollees than that ethnic group is represented in thegeneral population; a ratio greater than one denotes that more of that ethnicgroup is represented among SHIP enrollees than that ethnic group is representedin the general population.

Source: Hawaii State DePartment of Health, state Health Insurance Program,Report to the Legislature,” January 1992.

Table 14

Comparison of Island Population Distribution Between 1990 Census andState Health Insurance Program

IslandDistribution

Total

Oahu

Hawaii

Maui

Molokai

Lanai

Kauai

1990 CensusPercentagePopulation Distribution

1,108,229 100.00

836,231 75.46

120,317 10.86

91,361 8.24

6,717 0.61

2,426 0.22

51,177 4.62

SHIP ActiveMembers for Percentage Difference inDec. 1991 Distribution Distributional\

14,567 100.00 1.000

8,897 61.08 .809

3,448 23.67 2.180

1,096 7.52 .913

218 1.50 2.459

19 0.13 .591

889 6.10 1.320

(1) Percentagedistribution of SHIP members divided b ypercentage distribution of 1990Census population. A ratio of less than one denotes that the ethnic group is lessrepresented among SHIP enrollees than that ethnic group is represented in thegeneral population; a ratio greater than one denotes that more of that ethnicgroup is represented among SHIP enrollees than that ethnic group is representedin the general population.

Source: Hawaii State Department of Health, “State Health Insurance Program,Report to the Legislature,” January 1992.

— — .— . . — — . . —

!’

AgeDistribution

Total

0 - 4

5 - 1 7

1 8 - 2 0

21 -24

2 5 - 4 4

4 5 - 5 4

5 5 - 5 9

6 0 - 6 4.

65 +

Comparison of AgeState Health

Table 15

Distribution Between 1990 Census andInsurance Program’s Population

SHIP Active1990 CensusPercentage Members for Percentage Difference in‘Population Distribution Dec. 1991 Distribution Distribution(1)

1,108,229 100.00

7.51

17.77

4.38

6.55

34.20

9.82

4.09

4.40

11.28

14,567

83,223

196,903

48,549

72,636

379,035

108,775

45,375

48,728

125,005

1,691

4,438

582

666

4,838

1,251

436

488

177

100.00

11.61

30.47

4.00

4.57

33.21

8.59

2.99

3.35

1.22

1.000

1.546

1.715

.913

.698

.971

.875

.731

.761

.108

(1) Percentage distribution of SHIP members divided by percentage distribution of 1990Census population. A ratio of less than one denotes that the ethnic group is lessrepresented among SHIP enrollees than that ethnic group is represented in thegeneral population: a ratio greater than one denotes that more of that ethnicgroup is represented among SHIP enrollees than that ethnic group is representedin the general population.

Source: Hawaii State DepartmentReport to the Legislature,”

of Health, ‘StateJanuary 1992.

Health Insurance Program,

enrollment was among those ages 25 - 44 (4,838), followed by those ages 5 - 17

(4,438), O -4 (1 ,691), and 45-54 (1 ,251).

Age by sex distribution is summarized in table 16. Females represented 55

percent of enrollees, and males, 45 percent, and females outnumbered males in every

age category except for enrollees under age 1 and ages 6 - 18, although the

difference was very modest.

More than 62 percent of enrollees had gross family incomes equal to or less

than 100 percent of the federal poverty level and thus paid no premiums (table 17).

Approximately 96 percent of enrollees had gross family incomes equal to or below

200 percent of the federal poverty level. SHIP also reports that gross family income

was not a major factor in choice of carrier, with the percentage distribution of SHIP

members by income reflecting no significant differences between HMSA and Kaiser

.Permanence ( 1 3).

During the first full

visit rate was 2,851 visits

year of operations (1 991), the HMSA enrollee outpatient-

per 1,000 members and the non-maternity hospitalization

rate was 119 days per 1,000 members (table 18). The Kaiser Permanence enrollee

rates were 2,876 outpatient visits and 263 non-maternity hospital days per 1,000

members. Hospital admission rates were similar: 48 per 1,000 enrollees for HMSA

and 53 per 1,000 enrollees for Kaiser Permanence for non-maternity care; and 30 and

32 admissions per 1,000 enrollees, respectively, for maternity care. However,

average lengths of hospital stay were higher for the Kaiser Permanence enrollees; 4.95

days for Kaiser Permanence versus 2.50 days for HMSA enrollees for non-maternity

hospitalizations, and 3.00 days for Kaiser Permanence versus 2.32 days for HMSA

enrollees for maternity hospitalizations.

Page 28

Table 16

State Health Insurance ProgramAge by Sex Distribution

Active Members: December 1991

Age Distribution

Total

Under 1

1 -5

6 - 1 3

19

2 0 - 2 9

3 0 - 3 9

4 0 - 4 4

4 5 - 4 9

. 5 0 - 5 9

6 0 - 6 4

65 +

(one missing case)

Total

14,556

250

1,800

4,257

158

2,071

2,594

1,144

726

924

479

153

Male

6,541

139

892

2,140

55

788

1,062

551

328

361

163

62

Female

8,015

111

908

2,117

103

1,283

1,532

593

398

563

316 ~

91

Source: Hawaii State Department of Health, State Health Insurance Program,Report to the Legislature,” January 1992.

II

Federal PovertyLevel (FPL)

Total

100% or less

125% or less

150% or less

200% or less

250% or less

300% or less

Table 17

Federal Poverty Level of State HealthInsurance Clients, December 1991

HMSA Kaiser Permanence TotalClients Clients Clients

11,828 (100%) 2,739 (100%) 14,567 (1 00%)

7,553 (63.9%) 1,680 (61 .3%) 9,233 (63.4%)

1,542 (13.0%) 378 (13.8%) 1,920 (13.2%)

1,113 (9.4%) 247 ((9.0%) 1,360 (9.3%)

1,158 (9.8%) 306 (1 1.2%) 1,464 (10.1%)

367 (3.1%) 99 (3.6%) 466 (3.2%)

95 (0.8%) 29 (1.1%) 124 (0.9%)

Source: Hawaii State Department of Health, “State Health Insurance Program,Report to the Legislature,” January 1992

Table 18

Utilization Rates of State Health Insurance Clients,HMSA and Kaiserr Permanence Enrollees, 1990-1991

Health Outpatient Hospital (excluding maternity) MaternityPlan visits (1) D a y s m .ALOS Admissions Days(l) ALOS Admissions

HMSA(2) 2,851 119 2.50 48 76 2.32 30

Kaiser 2,876 263 4.95 53 96 3.00 32Pemnanente(3)

ALOS = Average Length of Stay. . —

(1) Per 1,000 enrollees(2) HMSA information based on services utilized 06/01/90 - 05/31/91(3) Kaiser Permanence information based on services utilized 08/01/90 - 07/31/91

Source; Hawaii State Depatment of Health, “State Health Insurance Program,Report to the Legislature,” January 1992

SHIP found no significant differences in the SHIP populations enrolled in the

HMSA and Kaiser Permanence plans (1 3). The only difference in utilization between

HMSA and Kaiser Permanence SHIP enrollees is in the average length of stay.

Possible explanations include: 1 ) HMSA hospital data is based only on paid hospital

days, which is 5 days under SHIP, and hospitalizations beyond five days may not have

been reported; and 2) HMSA SHIP enrollees have more limited benefits compared to

HMSA regular enrollees, while the Kaiser Permanence SHIP enrollees have the same

benefits package as regular Kaiser Permanence enrollees. Furthermore, regular HMSA

enrollees have shorter average length of stays than regular Kaiser Permanence

enrollees (30), so the difference in hospital length of stays between the HMSA and

Kaiser Permanence SHIP enrollees may also be reflecting differences in patient

utilization and provider decisions to hospitalize or not between the fee-for-service

HMSA system and the prepaid, capitated Kaiser Permanence system.

Finally, several surveys are being conducted or planned to better describe and

understand the remaining uninsured in Hawaii. Since October 1990, the Health

Surveillance Survey conducted annually by the Department of Health has included a

Health Insurance Supplement. And as mentioned earlier, the six primary care clinics

in the state, through the Hawaii State Primary Care Association, are also administering

a survey of their uninsured clients. Two other pilot surveys are being planned: 1 ) a

survey of the uninsured who visit the Emergency Room of the Queen’s Hospital in

Honolulu; and 2) a survey of students utilizing the student health service at the

University of Hawaii at Manoa.

Page 29